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China, I'm fairly sure that NPV8 means NPV at 8%, as Mumbles interpreted. Thanks for confirming that ten year life is reasonable - I took this assumption from the PFS (well, that was actually nine).
Mumbles, thanks for reminding me - I must stress that this is only my interpretation of the limited available data and very much my own opinion.
Mumbles ~ If you look at the BP it clearly says NPV8 ie 8 Years which corresponds to how far the JORV Reserve has been drilled out, There is nothing to fear about the Resource running out, last estimation was well North of 900,000t NdPr.
There is little point in calculating a life of mine NPV as Inflation usually makes anything beyond 10 years nonsensical.
The BIG take ion this is that Pensana can drastically increase production at anytime they choose to.
As to being Part ESG compliant ! it is a bit like a ***** saying (edited) she is still partly a virgin !!
I have to admit, i did have some questions on the NPV (net present value), as i couldn't find the time scale over which the NPV is calculated. I believe you are assuming 10 years. i could find a number in the BP that stated. The NPV uses a discount factor of 8% and i agree that the Post tax revenues require more than 10 years to achieve that number and it would be helpful to know number used. But the mine life is dependent on the reserves and much emphasis has been place on the size of the reserves. for the record the mining license is for 35 years. Wouldn't it be more helpful to calculate how many years it would take to achieve an NPV 2.4 billion at 8% discount and decide whether it was possible, or realistic, before saying that the BP is misleading to the tune of 58%. I am sure the LSE, who vet all the RNS before publishing required back up for the numbers used.
China, true, not full ESG, but Lynas 'traceability' is still the best available proxy for the impact of ESG-based differentiation - and the contribution to Lynas price achieved is limited. The argument as to why this would also be the case for full ESG was one of the subjects in the post of 13/06 20:27. On the point about Nd being a small part of the total cost of a car - agreed, but supply shortages would also be associated with higher prices, and it is the shortages that would promote substitution (supply chain disruption of course being a very high cost event for a car manufacturer).
Also true, Mumbles, that ESG price impact was not included in the BP - however, it seems that the price in the BP is 'high' (seemingly higher than the Adamas number quoted for 2030), and so I started to consider what might drive that price, from ground-floor up - the 'ESG premium' arose in that context. I still think, absent any further data, that the price in the BP is 'high', and suspect that the NPV is likely to be closer to $1bn than $2.3bn. Time will tell, of course - subject to funding , the securing of which will almost certainly entail a much more comprehensive review of price, conducted by investment professionals looking to provide that funding.
How on Earth can Lynas claim ESG credentials when they are about to get kicked out of Malaysia because the locals are concerned that their Environment is being polluted !!! The reason nobody is getting any ESG benefit yet is because nobody complies YET !
Well said Joe, Also consider that the marginal cost of having a Nd motor is minimal in the costing of a whole car, the big cost is in the batteries. Then there is the Marketing advantage ~ "This car is made from ESG sourced materials" will be a strong selling point to Western consumers.
Gentlemen, from my understanding, their has been no ESG premium considered when calculating the financials for Pensana. Although an emphasis has been made on the ESG compliant credentials of the project. This is a neccesity for the potential end users. The corporate attitude of compliance to ESG, is going (or has gone) very much the same way as Compliance to Bribery corruption. The discussion is binary. Either comply completely, or find an alternative. Security of supply and ESG concerns meant finding an alternative.
My take on this is, that if Lynas currently enjoy a “small premium” due to their ESG credentials, then it is likely to disappear.
I think trying to put a price on having a good ESG score is the wrong way of looking at it. As Oscar Wilde said a cynic “knows the price of everything and the value of nothing”.
How about thinking that the company will put ESG compliance in its DNA and use those standards to inform every decision. Rather than think ‘what’s it worth to me’ think ‘it’s the right thing to do’.
All companies are being exposed to greater scrutiny nowadays, good and bad will get noticed by the market and that will eventually filter into rewards, but trying to give it a valuation misses the point entirely.
Mumbles, thanks also for the response. I agree that manufacturers of many different product classes would rather use permanent magnets. My point is that the availability of substitutes will put a ceiling on any price rises, so even if there does turn-out to be a demand/supply imbalance, some of the demand will leak into other solutions, rather than being entirely reflected in price (over the medium term).
Your article (which is indeed a very good read) suggests to me that manufacturers are proactively building-in substitution plans in anticipation of Nd demand exceeding supply - in part due to having learnt lessons from the price spike in 2011.
Pensana should be able to sell its full production of NdPr one way or another (although routes to market is perhaps another subject) - as ever, the question is 'at what sales price'.
China, I was writing from the point of view that Lynas data appears to support the position that there is only a limited price gain to be had from ESG compliance - Lynas are somewhat ESG compliant, and customers pay extra for this (supply chain transparency), but this delivers only a 'small price premium' to the company (and there are other contributory factors to that premium).
Just to clarify (for the sake of Lynas), I have no connection with Lynas at all - I keep referencing their data as they provide one of the few sources of verifiable actuals in a quite opaque industry. Anything I've written here is as an independent actor and, of course, reflects my opinion only.
Apologies for the fragmented response, the conclusion in the article states
“Compromised availability and lack of sustainability is prompting the industry to be less reliant on rare-earth magnets”
If this issue is addressed, then manufacturers would prefer rare earth magnets
The quotation comes from this article, which fully explains why some some EV manufacturers are trying to avoid rare earth magnets. One is cost, but primarily due to supply sustainability. Excellent article https://www.automotive-iq.com/electrics-electronics/articles/developing-electric-motors-less-dependable-on-rare-earth-magnets
@China, Charles H isnt wrong that currently European automotive manufacturers are trying to avoid NdFeB magnets. But that is due to concerns regarding ESG credentials of current supply and supply chain risks due to the virtual monopolisation by the Chinese, and the current limitations on the production capacity outside of China, should an acceptable and reliable source of NdFeB magnets become available, they would much rather use them
to quote a leading manufacturer of motors.
“Special neodymium magnet alloys that include terbium and dysprosium have been developed with higher Curie temperature, allowing them to tolerate higher temperatures of up to 200°C. Because of the RE magnet properties, no other magnet material can match their high strength performance. “You cannot really replace RE magnets,” says Da Vukovich, president of Alliance LLC”
Personally, i have no doubt that Pensanas full production will have no issues finding buyers in Europe. Both with EV manufacturers who would much prefer these motors, should a sustainable reliable source be available and the offshore wind industry who due to the sheer size of the installations require the most efficient materials to achieve the optimum outputs.
Charles, Please make up your mind. you are becoming transparent !
Yesterday you said ESG would provide little or no price advantage to UK/EU/USA producers, Today you are jumping up and down saying Me Too, Me Too for Lynas, Your down ramping may not be as obvious as your predecessor but it does show.
I think it is about time that somebody gives Amanda a real headache,
The market is so large for just windmill power generation that some fields may well have the ferrite magnets. There is something to be said for having both types. The future price projections of rare elements were considered to be 5-9% per annum by an independent report submitted to Pensana. However lets assume these ferrite magnets are just as easy to maintain and their market share prevents zero increase in rare earth markets from 2025. This does not affect the Pensana pay back on loans in their summary business plans. Pensana market penetration was 5% target and the market for rare earth markets was still likely to be near 40% of the total at least and the Pensana magnets would be recyclable. It would be useful to know and we ask the company if they looked into all of this. The concept of ferrite magnets has been in press since 2013 so it not new design or knowledge. In 2019 prototypes were built so Pensana should indeed know all about it.
Always interesting to see the alternatives and where they are at and what the advantages and disadvantages are. I wonder what the difference in noise would be. Tony
A very interesting article that explains the role of permanent magnets in the wind turbine industry - including the current approach to ESG, and the potential for substitution should prices rise too high or supply be constrained.
www .windpowermonthly. com/article/1519221/rethinking-use-rare-earth-elements
The conclusion I'd draw from both is that, again, any ESG pricing premium due to Pensana will be limited. Also, scope for general market price rises will also be limited over the medium term due to potential for substitution.
"...Lynas provides product assurance certificates for its REEs and tracks the material through the supply chain, including magnet makers…"
"...Lynas… also offer 'three-way contracts' with OEMs and magnet manufacturers. Such measures 'provide security of supply, guaranteed provenance, product quality and pricing stability'…"
These points suggests that Lynas already broadly operate in the way that Pensana propose to.
Lynas reference their 'small pricing premium' in their financial updates:
"Lynas achieved a small price premium compared to the NdPr market price, supported by: … 3) end users placing more importance on being able to trace the origin of rare earths from a sustainable and auditable source of production to their end products, which Lynas can fulfil"
"...The high-temperature superconductor (HTS) generators currently under development also require very small amounts of REEs. The HTS being developed under the EU-funded EcoSwing research project uses 'much less than 1kg of REEs'…"
"...Others are aiming to eliminate rare earths altogether. UK-based GreenSpur Renewables is developing a multi-megawatt direct-drive generator using cheap and plentiful ferrite magnets…."